US sub-prime crisis could impact UK mortgage market

17-Aug-2007

Those 'on the margins' of home affordability such as first-time buyers in the UK may find it harder to get a mortgage following the current problems facing the sub-prime market in the US, an economist has said.

The problem stems from lenders in the US market increasing lending to those who could barely afford a mortgage.

With a fall in house prices over the last year and a downturn in the US economy millions are now defaulting on their mortgages, sending shockwaves through the world's capital markets.

Jonathan Said, senior economist at the Centre for Economic and Business Research, said this could impact those looking for a mortgage in the UK.

"I think there will be an impact in terms of mortgages because what this is doing is constraining the amount of liquidity that banks and mortgage houses have. Because of that they are going to be a bit more stringent on the types of credit that they give out," he explained.

"This will mean that the cheap, easy to get mortgages for people with lower credit ratings will probably need to be constrained a fair bit. That may take the sting out of the housing market."

He said that those on the margins of affordability will find it more difficult to take out mortgages as the banks will be much more cautious.

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